By Yasin Ebrahim
Investing.com — The Dow ended higher Friday, driven by a surge in energy but couldn’t avoid a weekly loss as a jump in rates and renewed bets on a more hawkish Federal Reserve are cooling the rotation into growth sectors including tech.
The Dow Jones Industrial Average rose 0.5%, or 169 points, but closed the week down about 0.2%. The Nasdaq was down 0.6%, and the S&P 500 rose 0.2%.
Alphabet (NASDAQ:GOOGL) ended the day flat, but its days of selling – in the wake of its AI chatbot Bard’s mishap – wounded sentiment on tech. A fall in semiconductors also weighed on tech following a slide in Nvidia.
NVIDIA (NASDAQ:NVDA) fell more than 4% as some question how much upside lies ahead for the stock, which is up about 44% year to date on bets that the surge in interest in AI applications – following strong demand for OpenAI’s ChatGPT tool – will boost chip demand.
“Nvidia is trading rich from a valuation perspective,” said Greg Bassuk, chief executive officer at AXS Investments in New York, pointing to the risk of “multiple compression” ahead.
Sentiment on growth sectors like tech were also hurt by renewed concerns of Fed hikes, with many now expecting the Fed to follow up its March hike, with another hike in May.
Treasury yields jumped, with the 2-year Treasury yield closing above 4.5% for the first time since November.
The earnings front, meanwhile, served up mostly weaker than expected results.
LYFT Inc (NASDAQ:LYFT) tumbled more than 36%, its biggest single-day decline, after the ride-sharing company reported revenue guidance that fell short of estimates and a surprise quarterly loss as lower prices and rising costs hurt margins.
“A different mix of rides, improving driver supply will cause less primetime pricing, and reduced base pricing due to heightened competition are all negatively impacting FY23 outlook,” Wedbush said as it downgraded the stock to Neutral from Outperform.
Expedia (NASDAQ:EXPE), meanwhile, reported quarterly results that missed on both the top and bottom lines, sending its shares more than 8% lower. But some analysts attributed the weakness to weather-related cancellations of bookings that weighed on quarterly results.
“[W]e are inclined to look through reported 4Q numbers, as Hurricane Ian in October and a rash of weather-related cancellations late in December served as the primary factors behind the miss,” Deustche Bank said in a note.
Energy stocks kept losses in the broader market in check, supported by rising oil prices after Russia said it would cut production by 500,000 barrels per day next month, at a time when many are expecting energy demand to be bolstered by the China reopening.
“The 1.1 mb/d rise in China demand this year (Q4/Q4) should push oil markets back into deficit in June, expose structural underinvestment, boost prices, and lead OPEC to reverse its November 2022 production cut in 2023H2 (the second half of 2023),” Goldman Sachs said in a note after cutting its 2023 price target on Brent crude by $5 to $75 per barrel.
In other news, Tesla Inc (NASDAQ:TSLA) fell 5% after its investor Ross Gerber said he will pursue a seat on the electric carmaker’s board amid frustrations about the electric carmaker’s lack of marketing, and public relations efforts.
“Tesla has let Elon be the voice of Tesla forever. Tesla doesn’t do any organized marketing, any outreach with the media or any lobbying and it’s led to a tremendous amount of FUD,” or fear, uncertainty and doubt, Gerber said, according to Reuters.